Background Investigations

To read my blog about background investgations, visit me at

Carolina Investigative Research and CIR’s Background Investigation Blog.


The value of an Investigative Company to conduct your background checks

Hedge-Fund Investors Hire Private Eyes to Avoid New Madoffs

By Saijel Kishan

March 23 (Bloomberg) — Randy Shain said he wasn’t stunned when hedge-fund managers Paul Greenwood and Stephen Walsh were arrested last month for allegedly misappropriating $554 million in client funds.

A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.

“It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers.

Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion.

“Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.”

‘Really Fruitful’

Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment.

Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm.

“This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.”

Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases.

$1,000 Cost

Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms.

“Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds.

Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds.

Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund.

Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million.

Undetected for Decades

Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm.

Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison.

“There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.”

Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds.

“In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said.

Driving Records

Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek.

“It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.”

A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said.

“At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998.

Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek.

“Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.”

To contact the reporter on this story: Saijel Kishan in New York at

Last Updated: March 22, 2009 20:11 EDT


Thi is an article from New Jersey emphazing  two points:  1) the danger of offshoring of background investigations, and 2) the trouble with having a criminal record.

Your background is his business

Sunday, February 15, 2009

It’s Brian Bodkin’s job to dwell on the past.

A lifelong New Jersey resident, Bodkin founded TABB in 1988. Based in Chester, the licensed private detective agency specializes in pre-employment background investigations, mostly serving clients from the health care, pharmaceutical and hospitality industries.

Bodkin said in this job market, employers spend thousands of dollars and countless hours to find the right employee and have many applicants. A background investigation is a cost-effective method to find the most qualified applicant, he said.

Bodkin talked to The Star-Ledger about the background investigation process.

What dangers are present within the background investigation industry? There is an ongoing trend in this industry to outsource background investigations to low-cost overseas operations. Few employers and even fewer applicants realize it is highly likely that not only the applicant’s personal identification, but also the applicant’s entire life history is often sent to a subcontractor 6,000 miles away, far beyond the scope of United States privacy laws. Outsourcing background investigations overseas has caused significant cases of mass identity theft and liability for the prospective employer.

What should someone do if they have blemishes on their record? If you have a criminal record, it is not necessarily a bar to employment. Employers will look at various factors to determine if a criminal record has any relation to the position for which the applicant has applied. Those factors include the length of time that has transpired since the time of the offense and the nature of the offense.

Most minor offenses at the municipal court level and some at the superior court level can be expunged. If you have a criminal record, don’t assume that an employer will not find it. Contact the municipal court or the superior court where the conviction occurred. Each court has a process to expunge records and the court will assist you. An attorney is not required to complete this process. An expunged record will not be found in a criminal record search.

What is the most memorable background investigation you can recall?  The most memorable background investigation is one that we did not conduct. It was the policy of a company that they would not conduct pre-employment background investigations on an employee who was previously employed by them when they applied for a position to return. Most likely, this was a cost-cutting decision.

In this case, a former employee was rehired and resumed the pattern of behavior most familiar to him, robbing his employer. Only this time, the employee would not leave any witnesses and murdered six fellow workers in a storage area during the commission of a robbery. The employee is now serving life in prison. Cutting costs is not a sound business strategy when it comes to background investigations.

— Rhea N. Bernard

Please submit suggestions for “Three Questions” to

© 2009 All Rights Reserved.

©2009 Star Ledger


Only in Hollywood.

Your golf game could get you hired of fired!

“You would be amazed what I can learn about you while playing a round of golf together” says licensed California Private Investigator, Lawrence Olmstead. With over twenty years of investigative experience and being a member of the PGA, Olmstead has developed corporate America’s “Holy Grail” of background investigations

Los Angeles (Hollywood) 1/17/2009 04:05 AM GMT (TransWorldNews)

Looking for a job in corporate America? If you are, you might need to rely on your golf skills. It’s common knowledge that golf is a huge part of the corporate culture and if you’ve “got game”, you have a better chance of getting hired, especially if your resume and background pass the “sniff” test.

Be careful, because some corporations have already been using an innovative background investigation solution that includes a relaxing, unassuming round of golf. Being a veteran investigator with over twenty years of experience and an avid golfer, PGA member and licensed private investigator, Lawrence Olmstead found he could learn a lot about people whenever he played a round of golf with them, especially if they didn’t know he was an investigator.

“I have had people tell me how they cheated on their wifes, ripped off their employers, do drugs, have sex at work, lie on their taxes and much more during a round of golf,” said Olmstead. A typical round of golf takes anywhere from three to five hours in some cases and spending that kind of time with a subject can be very enlightening. After a few beers, Bloody Marys and a few cigars, people loosen up and will say all kinds of things to a “stranger”.

People reveal such things as integrity, sportsmanship, respect, confidence, responsibility, perseverance, courtesy and judgment during a round of golf. “I’ve actually conducted one golf background where the subject revealed he cheated on his wife, was currently stealing from his employer and totally lied on his resume to try to get a job. To make matters worse, he hit a errant shot and broke a window off a fairway and supplied the owner with false information on how to contact him to pay for the broken window.” Needless to say, we didn’t need to complete anymore of the background investigation.

In another case an owner of a large mortgage company was concerned that one of it’s employees was using the service of a document forger to produce information to push loans through. “A weekend golf outing with the subject and two other company employees was the perfect way to find out if it was true or not. After a few holes and asking the subject what he did for a living, Olmstead was able to not only verify fraud had occurred, but actually was able to get the forgers name, email address and telephone number.

There are many types of investigations that can be initiated or conducted using golf. Be careful golfers because you never know who’s going to show up at your next round of golf.

Our process can save clients literally untold amounts for money for hiring the wrong person, civil liabilities, criminal prosecution and scandal.

“Our typical client is the large financial entities hiring professionals that will earn an income of more than one hundred thousand dollars a year and represent a company in a very high profile capacity,” said Olmstead.

For more information on investigations using golf, contact Lawrence Olmstead of Hollywood Private Investigations


One response to “Background Investigations

  1. Please visit to also explore what Carolina Investigative Research teaches about Background Investigations. See

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